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Mutual Funds and Mutual Fund Investing - Fidelity Investments

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If you are not familiar with call options, this lesson is a must. Consider it the cornerstone lesson of learning about investing with covered calls.

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Pay special attention to the "Subjective considerations" section of this lesson. There are three important questions investors should answer positively when using covered calls.

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Investors should calculate the static and if-called rates of return before using a covered call. This lesson will show you how.

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A covered call is an options strategy where an investor holds a long stock position and sells call options on that same stock on a share-for-share basis in an attempt to generate income.

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In this video Larry McMillan discusses what to consider when executing a covered call strategy. Pay special attention to the possible tax consequences.

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In this section, Probability of being assigned, take note of the table explaining the mathematical probabilities of assignment.

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The Probability Calculator may help you select a strike price by analyzing the likelihood of the underlying stock trading at or between price targets on a specified date based on historical volatility.

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In this lesson you will learn how to sell covered calls using the option trading ticket on Fidelity.com. The option trading ticket will help you find, evaluate, and place single or multi-leg option orders.

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Now let’s learn how to execute your trade using the option trading ticket in Active Trader Pro®. You can enter single or multi-leg trades and analyze the potential profit, loss and breakeven points within the trade ticket.

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Stock prices do not always cooperate with forecasts. Also, forecasts and objectives can change. As a result, investors who use covered calls should know about the basic “rolling” techniques in case they are ever needed.

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Investors who use covered calls should seek professional tax advice to make sure they are in compliance with current rules.

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Use this checklist to helps to ensure consistency and completeness before executing your covered call strategy.

What is a covered call?

Selling covered calls is a strategy in which an investor writes a call option contract while at the same time owning an equivalent number of shares of the underlying stock. Learn the basics of selling covered calls and how to use them in your investment Strategy.

Using calculations and diagrams

John should calculate the actual dollar amount involved in the buy write, in order to decide if the commitment is appropriate for him. In addition, he will draw a profit/loss diagram to figure out the maximum profit potential, maximum risk potential, and the breakeven point at expiration of the covered call position he is considering.

Important legal information about the e-mail you will be sending. By using this service, you agree to input your real e-mail address and only send it to people you know. It is a violation of law in some jurisdictions to falsely identify yourself in an e-mail. All information you provide will be used by Fidelity solely for the purpose of sending the e-mail on your behalf.The subject line of the e-mail you send will be "Fidelity.com: "

Options at Fidelity

Charts, screenshots, company stock symbols and examples contained in this module are for illustrative purposes only.

Options trading entails significant risk and is not appropriate for all investors. Certain complex options strategies carry additional risk. Before trading options, please readCharacteristics and Risks of Standardized Options. Supporting documentation for any claims, if applicable, will be furnished upon request.